Donor Liability
Some food businesses hesitate to donate food out of fear that, should the recipient become ill from the food, the donor could be held responsible.
Addressing the Fear of Donating
The Federal Bill Emerson Good Samaritan Food Donation Act was passed by the Senate and House of Representatives of the United States and was signed into law in 1996 to protect the donor and the recipient agency against liability, excepting only gross negligence and/or intentional misconduct. In addition, each state has passed Good Samaritan Laws that provide liability protection to good faith donors.
In 1988, the California legislature passed the Russell Bill which releases the donor from liability. (It can be found in sections 27900-27910 of the California Food and Agriculture code.) A copy of the full bill can be found here.
Effective January 1, 1989, The California Legislature passed a bill that specifically authorizes any food facility (this definition includes restaurants and other retailers of prepared food) to donate food to a non-profit charitable organization or to a food bank and specifically limits liability for injuries.
The new law provides that unless there has been negligence or a deliberately bad act during preparation if donated food is fit for human consumption at the time it is donated, the person donating it will not be liable for any injury resulting from its consumption. This is true whether or not laws regulating packaging, labeling, storage, or handling are complied with by the group receiving the donation. Prior law gave this protection to wholesale food processors, but now, restaurants and other retail facilities are protected too.
For additional Education on Liability, please visit these comprehensive sites.
Importance of the Emerson Bill
Some 160 billion pounds of discarded food also clogs up landfills. Worldwide, one-third of the world’s food — some 1.3 billion tons — is lost or wasted every year, according to the United Nations Environment Program. Jun 5, 2018
41 million Americans struggle with hunger, a number nearly equal to the 40.6 million officially living in poverty. Based on annual income, 72% of the households lived at or below the federal poverty level with a median annual household income of $9,175.
12.9 million children in the US are food insecure. There are 15.6 million U.S. households suffering from food insecurity – 12.7 percent of all U.S. households.
Potential donors most often cite fear of liability as the reason they refuse to donate to feeding programs. Before the passage of the national law, all 50 states and the District of Columbia had adopted laws protecting donors. Yet, differences in language and applicability between states often discouraged national and regional companies from donating. With the national law in place, regional and national donors have a uniform language that protects them from civil and criminal liability.
What does the law do?
The law protects good faith food donors from civil and criminal liability, should the product later cause harm to its recipient. The Emerson Act gives uniform federal protection to donors who may cross state lines.
The groups that are protected
The law protects food donors, including individuals, and nonprofit feeding programs who act in good faith. While exceptions are made for gross negligence, the law states that test groups will not be subject to civil or criminal liability. More specifically, the law protects individuals, corporations, partnerships, organizations, associations, governmental entities, wholesalers, retailers, restaurateurs, caterers, farmers, gleaners, nonprofit agencies, and more.
The types of food that are protected
The Emerson Act provides protection for food and grocery products that meet all quality and labeling standards imposed by federal, state, and local laws and regulations even though the food may not be “readily marketable due to appearance, age, freshness, grade, size, surplus or other conditions.”
Services now available to Donors
- Food donated to Peninsula Food Runners is not stored and is transported quickly to various feeding programs and shelters to ensure freshness. The fear of liability need not prevent anyone from donating to Peninsula Food Runners.
- This is presently a free Service to both Recipients and Donors. Analytical reports, phone support, and email access are available for all users (volunteers, donors, and recipients).
DONATE -> Tax Information for Donors
Examples of Tax Write off information
Current Tax Law
The “CARES Act” (H.R. 748), ), signed into law on March 27, 2020 (Public Law No: 116-136), addresses the COVID-19 emergency. Sections of the new law encourage surplus food donations by providing a temporary increase to the charitable contributions cap and by addressing net operating losses.
Increase Charitable Contributions Cap
The CARES Act modifies Section 170 of the Internal Revenue Code by increasing the charitable contributions cap for donations of food inventory from 15% to 25% of net income for non-C corporations or taxable income for C-corporations, applicable to taxable years that begin after December 31, 2019. The ability to carry forward tax deductions in excess of this cap for 5 years remains unchanged.
Net Operating Loss Changes
A net operating loss (NOL) happens when your allowable deductions (wages, mortgage interest, rent, utilities, inventory, and equipment depreciation) surpass your taxable income. The Tax Cuts and Jobs Act (TCJA) of 2017 eliminated the option for businesses to carry back those excess losses to prior years. The TCJA limited the amount losses you could take to 80% of the actual loss in any year, and allowed you to carry forward the 20% balance, to apply it against future year income.
The CARES Act changes the treatment of NOLs to pre-TCJA rules. You can now claim 100% your net operating losses in 2020, 2019, or 2018 and you can carry them back for up to five years (2013-2017). An amended return may be filed to claim the benefit back to 2013.
The CARES Act also allows NOLs arising in tax years beginning after December 31, 2020, to offset 100% of income going forward rather than 80% as allowed under the TCJA.
Please see your accountant or financial advisor regarding your specific situation.
Tax Cuts and Jobs Act (H.R. 1), passed by Congress on Dec 20, 2017, does not change the ability for a company to take the enhanced deduction for the donation of surplus food. Based on this Act, the following information is still accurate.
U.S. Congress enacted Section 170 of the Internal Revenue Code in 1976 to encourage donations by allowing C corporations to earn an enhanced tax deduction for donating selected surplus property, including food. In 2015, Congress passed the PATH Act as Division Q of the Consolidated Appropriations Act, 2016, which modified Section 170 of the Internal Revenue Code to allow all companies to earn an enhanced tax deduction for donating selected surplus property, including food.
This encourages food donations by:
- Making the enhanced tax deduction permanently available for Non-C corporations – retroactive for contributions made after December 31, 2014.
- Increasing the charitable contributions cap from 10% to 15% of net income for Non-C corporations or taxable income for C corporations – applicable to taxable years beginning after December 31, 2015. The additional 5% is specifically for food donations.
- Allowing Non-C corporations a tax deduction carry forward of 5 years, mirroring the treatment of C corporations – applicable to taxable years beginning after December 31, 2015.
- Defining the Fair Market Value for donated food by taking into account the price for which the item is sold at the time of the contribution without regard to lack of market, internal standards – applicable to taxable years beginning after December 31, 2015.
- Providing a basis for food donations from businesses using the cash method of accounting (typically identified as “farmers and ranchers”) as 25% of the fair market value – applicable to taxable years beginning after December 31, 2015.
Technical Tax Correction for S Corporations
Prior to December of 2007, S corporations with limited shareholder basis faced a dilemma regarding their ability to take the enhanced tax deduction for donating food inventory. FDC submitted a technical correction to the House Committee on Ways and Means in 2007 which was integrated into The Tax Technical Corrections Act of 2007 (HR 4839 and Public Law 110-172). This made a technical correction to the provision relating to contributions of appreciated property by an S corporation.
The technical correction provides that the present-law basis limitation on the deduction of S corporation items does not apply to a contribution of appreciated property to the extent the shareholder’s pro rata share of the contribution exceeds the shareholder’s pro rata share of the adjusted basis of the property. This means that S corporation shareholders can take the enhanced deduction regardless of their basis in the corporation.
Peninsula Food Runners, Inc.
PO Box 460612
San Francisco, CA 94146
info@peninsulafoodrunners.org
(415) 826-6903
Please dont hesitate to give us a call if you have any questions.